On responsibility of bank owners

This year, the public witnessed the mass bankruptcy of Ukrainian banks. This situation is caused by both the financial situation of the state, and not least by offenses in the banking sector, including a significant amount of loans to the companies associated with bank owners.

Law No. 2085 is an extremely important step to fight the corruption and oligarchy inthe state economy.

However, some provisions of the Law show that the effective application of the Law in practice will not be possible because:

According to the civil law, only direct damage is subject compensation. The Law states, “The Fund or the Fund agent may request the bank managers, controllers, end beneficial owners, other owners of a substantial participation to satisfy a part of the bank creditors’ claims with their property, if the acts or omissions of such persons resulted in bank’s losses and/or damaged the interests of depositors and other bank creditors, and the estimated value of liquidation estate of the bank approved by the Fund is less than the amount of claims included in the registry of accepted creditors’ claims.” That means that the condition of liability is the difference between claims and estimated value of the assets, and not the actual damage, which is contrary to the principles of civil law.

The condition of compensation for damages is the presence of offense (action, inaction, consequences and the causal relationship between them). The Law provision, which provides that the amount of the claim cannot be less than the difference between the claims included in the registry of accepted creditors’ claims and estimated cost of the bank liquidation estate approved by the Fund does not guarantee the actual compensation of damages, since it will be very difficult to prove a causal connection between actions and consequences in banking.

The compensation of losses is civil liability. Under the provisions of the Constitution, the Laws of Ukraine do not have a retroactive effect. This means that the owners of the banks having a current temporary administration or pending the liquidation will not bear any liability.

That is, the Law of Ukraine will not be an effective tool in the fight against offenses in the banking sector.